Nokia announced another loss-making quarter, as revenue from both its smartphone and mass-market handset units tailed off. However, the drop for the three months to 30 September 2011 was less than some analysts had forecast, sparking speculation that the company’s turnaround strategy may be beginning to have an effect.
In a statement, Stephen Elop, the company’s CEO, noted that: “in Q3 we started to see signs of early improvement in many areas, but we must continue to focus on consistent progress so that we can move Nokia through the transformation and deliver superior results to our shareholders.”
For the quarter, the company reported a loss attributable to equity holders of EUR68 million, compared with a prior-year profit of EUR529 million, on sales of EUR8.98 billion, down from EUR10.27 billion.
Sales in the core Devices & Services unit fell by 25 percent to EUR5.39 billion, shrinking across all regions except MEA. Operating profit fell a huge 84 percent to EUR132 million, from EUR807 million.
The company shipped a total of 106.6 million units during the period, down 3 percent year-on-year, but marking a 20 percent increase over the prior sequential quarter due to higher mass-market device volumes. Nokia also noted actions taken in the second quarter to reduce inventory levels held by distributors and operators.
Revenue from smartphones fell by 39 percent to EUR2.21 billion, as volumes decreased by 38 percent to 16.8 million units – lower than shipments of Apple’s iPhone, and with Samsung also set to become a bigger smartphone vendor than Nokia during the period. It said that this was the result of “the strong momentum of competing smartphone platforms relative to our higher priced Symbian devices, as well as pricing tactics by certain competitors.”
On a sequential basis, smartphone volumes were “virtually flat,” which the company said “reflected better demand for our lower priced Symbian smartphones compared to our higher priced Symbian smartphones.”
The company did not announce any further details of its planned Windows Phone devices, which are expected to be announced at its Nokia World event next week. It noted that the first unit will be available “in select countries later this quarter,” with the intention to “systematically increase” this during 2012.
Revenue from Nokia’s mass-market Mobile Phones business fell by 14 percent to EUR2.9 billion, with volumes increasing by 8 percent to 89.8 million – average selling prices in this unit were pressured. This business did see a sequential recovery, with revenue up 14 percent and volumes up 25 percent, which the company said was “primarily driven by the broader availability of our dual SIM devices, which also helped to increase demand for other devices across our Mobile Phones portfolio.”
The Nokia Siemens Networks infrastructure business is also showing positive signs, with net sales increasing by 16 percent year-on-year to EUR3.41 billion – although down from the prior sequential quarter by 6 percent.
The sales growth was “driven primarily by growth from the acquired Motorola Solutions networks assets” – without this, net sales would have increased by 3 percent, driven by growth in the company’s Global Services unit. NSN narrowed its operating loss to EUR114 million from EUR282 million.
Looking forward, Nokia is expecting its non-IFRS Devices & Services operating margin to be in the 1 percent – 5 percent range, compared with 4.1 percent in the current quarter (and 10.5 percent in Q3 2010). While the company is forecasting an expected sequential increase in sales, it is also anticipating a greater-than-normal increase in operating expenses as new products are launched.